TOPIC: picking a fight

As part of what I do, run two theatres, book theatres, run bigscreenbiz.com, and own and run a number of other small companies as well as serve on a city council, past 3 term mayor, etc. etc. I spend far too much time thinking about the other guy, and generally the little guy. As Mitt Romney says:only in reverse. Because I do not run theatres in major or even moderate population based areas I have more developed idea in the world of smaller or niche markets than what makes an AMC tick on Broadway and 48th in NYC. I am a small town guy who lived in NYC, grew up in suburban New Jersy, and I have concluded that the extermination of small town theatres is a coming reality. And that I am going to do my best to fight it. To that end I started by writing the following piece for Screen Trade magazine, this month's issue alone is a really good piece of work and all I can say about Screen Trade is it is not a wholly owned entity or so driven by the ad dollar that they will actually print something interesting and a bit incendiary. Good on them. And they are getting good ad dollars (or pounds) too. The article that was written for Screen Trade was picked up by www.indiewire.com and has become the hottest article they ever ran other than an Oscar story. Reading the comments is worth the trip.

Since then.... I have been mailing and emailing film critics, directors, film companies, writers, web sites, etc. and soon will move to include states attorney generals, governors, etc. I'm not going to lay in bed thinking "someone should have done something." Engaging this debate has been clarifying for me: it's not about digital cinema. it's about a technology change that was gerrymandered into a trust that excluded the less wealthy. It's as if we were told you can only drive a Cadillac and anything else must get off the road. Lots more analogies apply but that will suffice. I realize this isn't everyone's fight and that the players like NATO (arguing rather ironically for the destruction of theatres) and the MPPA who hired Senator Dodd for defeating any government backlash, and the equipment cabal that conspired to create a level of tech standards that it would be inescapably high priced; this group will not and probably cannot, be slowed or defeated or even persuaded to bend or care but I do intend to fight them and their evil plans. I say that with a bit of moviesque sense of humor. I'm not totally nuts here. I just can't abide bullying. I will do my best to take a T-65 X Wing Star Fighter and shove a lucky shot into their Death Star. May the force be with me. Here's the article from Screen Trade.

If the transition to digital projection was a movie called “Titanic” it would swiftly proceed to the crew making the following announcement: “Will all the wealthy and strong please step into the life boats. Will all the weak and poor, most of the women and children, please step back away from the lifeboats and have a nice day.” Some may term that a blunt analogy but there was quite a bit of that on Titanic, and it certainly the case with the digital conversion so maybe we have seen this movie.

“Convert or die.” This was how John Fithian, National Association of Theatre Owners, CEO and President has repeatedly set the terms. It’s a crude way of getting attention but at least we knew where we stood. The conversion stampede was on.

And it worked. It’s clear today that many theatres who never thought they’d go digital are now adopting at a fast pace. At the end of 2011 Fox recently announced they’d no longer release product in 35 MM “Sometime in the next year or two.” Stampede accelerates. The VPF’s will become unavailable at some nearing yet shifting point. And then it really will be “game on.”

NATO recently estimated that up to 20 % of USA theatres with as many as 10,000 screens would not convert and will probably close. Convert or die indeed. And that’s what’s called representing theatre owners.
At one of my theatres which is turning 100 years old this April we are deep in the midst of conversion and probably by the time this sees print we’ll be all digital. I’ve come to accept and embrace and look forward to the day. Every time I see platter scratches or a dirty print or deal with a particularly odd projectionist I look forward to it more and more.

Again: If this was a movie; the towering bridge which theatre owners need to cross to get to digital cinema is on fire, or there’s dynamite with a lit fuse and a team of colorful commandoes, or the dam is springing leaks and about to fail. The 35mm bridge between distribution and exhibition is going to fail cataclysmically and left behind will be thousands of theatres worldwide. It has never before been this way. Ever since the birth of the film and exhibition industry there has been a steady and orderly development of new equipment so that as early adopters grabbed the latest equipment there would be a healthy market in used equipment for the smaller less profitable theatres and markets. Small towns, the world over, developed their theatres when everyone went to the movies all the time so many theatres are in operation today that could never be built with today’s costs and the slowing pace of theatre goers.

Someone asked me; “Why does it matter?” It’s an excellent question. Does it matter that a thousand small theatres may close in the USA? What would be lost? I think of the millions of dreams that have taken flight in a movie theatre, some in such small towns and villages that life there is difficult if not impossible to imagine for those who live in large cities. I know that the economic development power of movie theatres has been profound. People want to live where there are theatres. For the same reason that every successful city center, mall, and downtown works to attract and keep a movie theatre, small towns all over the world stand to lose a foundation stone which has kept them connected and a part of the world. I believe the loss is unacceptable.

The brain trust in Hollywood seem committed to playing a game of diminishing exhibition returns and appear ready to write off huge swaths of the world and the ticket buying people who built the industry. You can bet that the same people who spent 150 million to make Mars Needs Moms have crunched the numbers and they think they can live with a lot less theatres in this world.
Many countries handle this differently. In some the conversion is a national priority paid for by government grants. But here in the “dog eat dog” USA if you have a historic theatre the equipment does not even qualify for tax credits.

I wish I could see where this is going and how it will all play out. The pace is fast and will not slow. At a very near point if you do not have digital you will not show a movie. There will be tightening pressure. Knowing all of the USA government players involved I cannot see how this industry will be allowed to kill off thousands of screens. I can easily imagine individual states or even national antitrust and legal action as the scale and certainty of mass theatrical extermination starts to become clear. Right now it’s a thousand brush fires that people are fighting individually. What happens when they start to fight together?
Digital cinema has great promise that is being realized. It cannot be that as we take this great leap forward that we leave behind so many.

If this was a movie….. Remember Independence Day? Bill Pullman playing the President of the USA asks the creepy alien; “What do you want from us?” And the answer was “Die.” That’s about the level of options many of our fellow theatre owners are dealing with between the distributors, our “convert or die” representatives, the expiring VPF, the lack of any used equipment favored by folks on the lower rungs, and all the varied powers that are driving this digital train. There ought to be a law.

I applaud your passion, Mike. I tend to agree with what you have said here.

Because there are competing interests in the digital transition, we have to stop and consider who is concerned with the plight of small town theaters and other small exhibitors who will be squeezed out. It does seem that NATO whose most influential members are major chains have decided that they cannot help everyone. There simply aren't enough life boats on the Titanic, so to speak. These life boats are not intended to help everyone. Only those who are "worth saving" from the viewpoint of those who are providing the lifeboats. Honestly, it's hard to blame them. It doesn't serve their interests to help the little guy who doesn't bring them a lot of money.

From everything I've read over the past years, I never (not even when I first opened) felt like my theater would be one that would be eligible for VPFs. I do remember reading that the idea for smaller theaters who were only seasonal first run and therefore not eligible for VPFs would be for them to buy used equipment as early adopters upgraded. Now, it seems that this used equipment isn't going to become available fast enough to keep many from drowning. There is also serious doubt that this used equipment will ever be available in such a way that it would be what is needed.

No, I never joined NATO or CBG. I was too busy "fighting fires" in my own operation to consider it a worthwhile pursuit. How could I concern myself with the future, when the present was so shaky. I may not be typical. My operation was only open for 13 months. It was located in a town of about 3,500 and a county of 20,000. There were no other theaters in the county, but I still found it challenging to draw big enough crowds to keep going. Based on commonly touted statistics, I thought I could at least make a go of it. The business didn't go bankrupt, but I chose to close it and move on for a better opportunity. It essentially broke even.

I said I might not have been typical. Well, typical would probably include the 80 or 90 percent of theaters that have or will convert to digital without too much wailing and moaning. I guess my theater would be part of the rest, at least if it is left up to me. If someone else comes along with more ability and know-how, then great. But, I'm sure there are others like me who put everything they had into their theaters. I spent my life savings, sold my recently paid for house to fund re-construction expenses, and went into significant debt that I will be paying off for a very long time. I walked away with nothing. Nearly everything I have is tied up in a closed theater in a small town in Oklahoma. Maybe I made mistakes, but I had passion and a dream. I'm sure I had that in common with many others in this business.

So, when those non-typical owners close their theaters, they may be ruined, or maybe not, but the towns will often be left without any theater. Sometimes passion isn't enough. In reality, it takes money to keep a theater running. Who should provide the money if ticket sales don't justify a sweet financing deal complete with VPFs? An owner could say that everything was going ok, at least breaking even, until the prospect of digital conversion came along. Now, he might have to convince a bank or other lender that somehow he can come up with many hundreds or thousands of dollars a month extra to pay for equipment that will probably not bring many more sales. This is very difficult when he was barely making ends meet to start with.

When potential buyers contact the local bank in the town where my theater is located, the banks are not interested in lending money to purchase it. They don't see it as a good risk since I didn't make a great success out of it. I don't imagine it would have been any different if I had kept going. The banks would have looked at my books and said that I couldn't service that kind of additional debt. Now I offer lease-to-own deals and similar incentives to encourage potential buyers. It is left to me to finance a sale, but I can't go further. I can't finance digital equipment too.

So, I'm still looking for someone with more than just passion or a dream. Should I ask the city or the community to save the theater? I have asked the city and community leaders to take an interest. In a small town environment where people don't have much money, nobody has stepped forward to organize a save the theater movement. It is not at risk of being torn down, but it is at risk of never being re-opened as a theater. So, do the people deserve a theater? I think they do, but they are more concerned with their own lives than they are with the theater. It's hard to blame them.

I've tried to get help from celebrities, an indian tribe, a college, a museum, the chamber of commerce, city government, congressmen, and senators. Nobody has close enough ties to the situation to really get involved. They may have access to money, but they don't have a passion for my theater. The only people who ever want to help are those without a pot to pee in. So, money and passion haven't come together yet. How many other theater owners will share my problems in the near future?

I still have hope for the future. I regularly hear from people who are interested in reopening my theater, as long as it doesn't cost them too much. I hope and pray that the next guy is the one who can figure out how to make it work on less than a stellar bank account.

But wait. I have more to say, if you will just bear with me. Since it is so rare in a small town to find someone with passion and enough money to keep the local theater going when the returns will be modest at best, who do we turn to? Mike pointed out the economic impact of a local theater. That is an important point, but often not enough. I think it comes down to defining exactly what it is about a theater that makes it worth saving. I have thought about this and when the economic impact isn't enough to convince people, I think it comes down to cultural impact and quality of life.

If our nation lets small town theaters die, it will mean that the quality of life in those communities will diminish. It's hard enough to get people to want to live in a small town as it is. It will be one more nail in their coffin to lose their theater. In most of those towns, they have gone on with their lives the best way they know how as they lose many of the downtown merchants that used to be there because of big box stores in nearby population centers. And now they will lose the local theater to the big box multiplex in the bigger population center, and eventually I predict they will lose many of the young people that would be their future. Most of those young people have been leaving for years already. This is not going to help.

So, if our nation has an interest in maintaining small town America, the nation needs to do something about it. I'm not saying the government should bail out small theater owners, although it might sound nice to those in dire straits. I am, however, suggesting that it might be time that the nation look at the cultural significance that theaters hold as community anchors, even if not economic anchors. When a service is considered important to the general public, but it is in no individual's best interest or within no individual's ability to provide the service, then typically some level of government steps in and provides that service. We call those things "public services". That is how we came to have schools, roads, libraries, parks, etc. Should government provide or support small town theaters as public services? But, nobody wants to spend more taxpayer dollars than necessary these days. Why should a taxpayer in New York City help support a theater in podunk Oklahoma? Or even a taxpayer in Oklahoma City supporting a theater in Checotah, Oklahoma? Well, our nation does that kind of thing all the time, but it doesn't make it right.

But, there must be something that can be done. Perhaps government can simply make it possible for small town theaters to survive by reviewing all that is going on in the movie distribution and movie exhibition industries to ensure that no unfair trade practices are taking place. Maybe they could request that distributors continue to provide movies on film in the interest of maintaining a healthy small town America. After all, they will not need to make nearly as many film copies to serve the small percentage of theaters who can't convert. Perhaps different levels of government could give tax breaks for money earned at small town theaters. That way, if a distributor didn't have to pay taxes on the 5% of income that comes in from small theaters, it might be more worth their while to do business with them. Maybe a distributor should be encouraged to provide long term financing to a theater's digital equipment by providing tax breaks on the money that is loaned and/or on the money that is made on interest paid by theaters.

I also think that a community should be able to declare a theater a high priority public service need when no individual or company can be found who is willing or able to operate it. These high priority needs should be provided every tax break possible by all levels of government (federal income tax, state income tax, sales tax, property tax, etc.) just to make it possible for somebody to make a go of it. Of course, the list of high priority needs could possibly include other kinds of services, and not just theaters. Can't get anyone in to re-open the only gas station in town, no matter how hard you try? Put it on the list. Can't find a doctor to hang up a shingle in your town, no matter how hard you try? Put it on the list. And so on.

This wouldn't be paying new tax money to support things that haven't been supported before. It would be giving many tax breaks to new low-potential businesses where they are needed most. It would be tax cuts on revenue that wouldn't exist without the tax cuts anyway.

Well, that's enough for now. There's lots of things I don't know about how taxes work and so on, but maybe there is a seed here for something to grow.

Thanks, Mike. I hope there is something in what I've said that will be helpful to someone. Calling for changes in government programs, policies, and laws is surely a slow way to bring about change. I wish I had ideas that could be implemented immediately. If it is left up to me, my ideas will probably go no further than this forum or other similar ones. Anyone who knows what to do with such ideas, feel free to use anything I've said.

I agree with your recent comments that there should be a less expensive way to convert to digital. I think the $5000 goal for low cost transition is a good place to go. This number was also mentioned in ITA discussions lately. Unlike some, I thought that some of the ideas presented on the ITA-USA.com forum were worth pursuing. They are trying to make low cost transition a real possibility, as I understand it. I don't know much about their organization, their abilities, their funding, their membership, and so on, but I liked some of their ideas.

Basically, they seemed to be interested in coming up with alternative low cost equipment that could do the same things as the high cost d-cinema equipment that everyone is told they must have to survive now. For those, who can find a way to convert with higher cost equipment, they won't think the effort is worthwhile. For those theater owners who won't be able to navigate high cost conversion, this is something to pay attention to, and possibly even get involved with. The more that get involved the better.

To bring this thread back around to the topic of "picking a fight", I will point out that any change to government programs, policies, or laws will require plenty of fighting. Also, getting major players in the movie industry to consider using alternative lower cost technology will also require plenty of fighting. No matter what small theater owners choose to do to keep their theaters operational, it is going to be an uphill battle. The only thing that would be "easy" is laying down and dying. So, who is for fighting for survival? And, who is ready to give up and die?

The ITA has a membership now that has collectively about 350 screens. Our concern is that the market is being tampered and certain sectors of it, small operators, drive-ins might find themselves faced with an economic model which might not make any sense to them and pack it in. We are current bench testing 3 possible 2 K solutions and then based on our results, have to get the technology certified. I cannot believe that the governments at a State level cannot see the inherent issues and economic inequalities that are being created.

For the ITA, our focus is

1. Find alternative technology sets

2. Discover methods and products which lower overhead

3. Work towards diversifying the content base for the smaller theatre and drive-in

We have had some good conversation with both Mike Hurley and Lionheart. We have to work hard and we have to work fast, because of various issues 35mm is quickly coming to an end.

I would love to talk to you about this, however the web address www.ita-usa,com doesn't go anywhere. I notice that it ends with a ,com rather then a .com, which seems strange, but I have tried it both ways with no results.